Tonight is the finals of the NCAA Men’s Basketball Tournament, known as March Madness. As I went to law school at the University of Michigan, I will be pulling for the Wolverines to win the big game. If you are not a Louisville or Big East fan I hope that you can pull for us or at least throw some good mojo UM’s way as we may need all the help we can get. Go Blue!

One of the things made clear in the FCPA Guidance is that employees who engage in violations of the Foreign Corrupt Practices Act (FCPA) must be disciplined. One of the Ten Hallmarks of an Effective Compliance Program is discipline. The Guidance says that a company’s compliance program should apply from “the board room to the supply room – no one should be beyond its reach.” There should be appropriate discipline in place and administered for any violation of the FCPA or a company’s compliance program. But what if an employee’s conduct is something less than a clear violation of the FCPA? What if an employee goes right up to the line, stands next to it and kicks dirt on that line but never (seems) to go over. What should you do?

Imagine a scenario like the following. Your company is engaged in delicate negotiations to merge with another entity which will greatly increase the scope of your brand. You obviously do not want any negative information to leak out into the public sphere that your company does not follow its own Code of Conduct or the ethical values that it publicly espouses. You are brought information that one of your top sales people has engaged in a pattern of conduct that would appear not to meet your own company standards. Further, it turns out that there are videos showing the conduct in question. Not only do you see it but the company’s head of Human Resources (HR), Chief Financial Officer (CFO) and General Counsel (GC) see it as well. An internal investigation commences and it is determined that no laws are broken so you privately discipline the employee in question.

The merger goes through and thereafter it is decided that an outside law firm should conduct a more thorough investigation. This outside counsel interviews a full range of company employees and reviews internal company communications. Other company employees say that the employee in question is just very passionate about his job. However, it turns out that the focus of this outside law firm’s investigation was to determine if firing the employee in question would give that employee a basis to sue the company for wrongful termination. (The company in question is not located in the great state of Texas where you can fire anyone for a good reason, bad reason or no reason.) But even the outside law firm’s report does note that the employee in question did ‘cross the line.’ Yet you decide that no further discipline or even a follow up on the employee in question is warranted.

Now assume that the videos in question become public. There is outrage. Even the company President says that after reviewing the video it only took him “five minutes” to decide to fire the employee in question. The employee is fired and questions are being asked why you did not fire the President as well?

The above fictional scenario was based on the New York Times (NYT) article, entitled “Rutgers Officials Long Knew of Coach’s Actions”, by reporter Steve Eder. In his piece Eder details the long trail of evidence that Rutgers had been made aware of regarding the abusive behavior of its men’s basketball coach Mike Rice. Even after two investigations and presentation of a video showing Rice throwing basketballs at players, kicking them and taunting them with “homophobic slurs” Rice was not fired. Rice was reprimanded, fined and the University assigned its “sports psychologist to work with the team”. It was not until this video went viral and the whole world saw the abuse that Rice meted out to his team at practices did the outrage become sufficient enough for Rice’s termination. The Athletic Director, who had been made aware of all of the above, had requested the internal and external law firm investigations,  yet did not terminate Rice, was required to resign from all the fallout.

So just how much does it take for an entity to follow its own values? What about the employee who does ‘cross the line’ and does business in an unethical manner? Is that someone who can be trusted to follow the rules and laws like the FCPA? The FCPA Guidance makes clear that appropriate discipline should be “fairly and consistently applied across the organization. No executive should be above compliance, no employee below compliance, and no person within an organization deemed too valuable to be disciplined, if warranted. Rewarding good behavior and sanctioning bad behavior reinforces a culture of compliance and ethics throughout an organization.”

I often talk about the Fair Process Doctrine and how it behooves company’s to treat employees fairly. However, there is also a responsibility for a company to act appropriately when its employees engage in conduct that is not illegal but is so far outside the acceptable norms that it cannot be condoned. Remember what is true for Rutgers is also true for businesses in the private sector.